TAXATION OF EMPLOYEES VS. INDEPENDENT CONTRACTORS: THE REQUIREMENT FOR A FIXED AND ASCERTAINABLE REMUNERATION (A REVIEW OF INFETIOUS DISEASE INSTITUTE V URA (APPLICATION NO. 15 OF 2019) RULING.)
a. Introduction Employers have , in a move to lessen the tax burden, characterized some of their workers as independent contractors . This characterization is premised on the understanding that whilst Section 118 of the Income Tax Act Cap 340 imposes a fixed 6% withholding tax for independent contractors, it imposes various rates of PAYE for employees that earn above Ugx. 235,000, depending on the income bracket. The implication is that employers remit more money to URA through PAYE contributions than if it were Independent Contractors. In a recent decision by the Tax Appeals Tribunal, it was ruled that whilst an employer might characterize certain persons as independent contractors, the payment made to such persons may entitle URA to treat them as employees thus culminating in the employer making the necessary PAYE contributions. This blog reviews the case of Infectious Disease Institute v Uganda Revenue Authority in which t...